BankSA State Monitor reveals belt tightening amid rate hikes, job market worries

Small businesses and consumers are tightening their belts as interest rate hikes and rising costs put a handbrake on spending ahead of holiday trading.

Business and consumer confidence is waning ahead of the busy holiday trading period. Picture: NCA NewsWire / Brenton Edwards

South Australian businesses and consumers are continuing to tighten their belts as rising interest rates, a weakening jobs market and global economic instability put a handbrake on spending in the lead up to the crucial holiday trading period.

BankSA’s quarterly State Monitor, released on Tuesday, shows business confidence has fallen by 3.0 points to 112.6, where 100 is a neutral level, while consumer confidence fell for a fourth consecutive quarter, slipping 2.9 points to 104.9.

The survey, conducted in early October - before the most recent interest rate hike - showed a 22 per cent slump in the number of consumers who had made a major purchase in the past three months, and a 9 per cent fall in the number of businesses intending to make a major investment in the coming 12 months.

There was also a 22 per cent decrease in the number of businesses that had taken on additional employees in the past three months, and a 15 per cent fall in the number intending to take on additional employees in the coming quarter.

BankSA state general manager business David Firth said the survey showed businesses were choosing to build up cash reserves and pay down debt as they faced higher costs and global economic instability.

“Business confidence is now at the lowest level since February 2020, albeit still at quite reasonable levels - but larger businesses are definitely more confident and probably in better shape than smaller businesses,” he said.

“The survey shows that key external factors such as petrol prices, cost of energy, wages relative to the cost of living, and world affairs were concerning both consumers and businesses.

“Inflation pressures and the higher cost of living is starting to materially impact major purchasing decisions.”

There was some bright news in the latest survey, with businesses more optimistic about their own turnover (up 9 per cent), and also more positive about general small business activity in the state (up 7 per cent).

However worries about the local job market are beginning to mount, with an 8 per cent fall in the number of consumers confident of being able to switch jobs if needed. They were also less confident about their own household financial situation, with the measure slipping 4 points.

The 35-49 age group is now the most pessimistic, according to the survey, while consumers aged 18-24 were the most confident.

“They don’t appear to be slowing down in terms of spending for today and not saving for tomorrow. They’re probably less likely to be owning a home, they’re less likely to have commitments like children and things like education expenses,” Mr Firth said.

“But the biggest fall is in that 35 to 49 age bracket, and they’re probably the most prone to higher rents, higher living costs and things like that.

“I think the upcoming retail spending going into Christmas is going to provide some really interesting indicators, and I think people will be looking to try and get the best bang for their buck.”

Mr Firth said an in-depth look into the spending habits of consumers showed they were reining in discretionary spending ahead of the all-important holiday trading period - traditionally the busiest time of the year for retailers.

“Consumers said their top three financial activities over the past 12 months were cutting back on household spending, putting spare cash into savings rather than spending it, and putting off a planned purchase to keep cash in the bank,” he said.

“In terms of the big ticket items, travel is definitely the number one big ticket item that people have been saving for.

“And we’re just starting to see that sort of pull back on some of the discretionary items, and that’s really consistent with the feedback we’re getting from our customer base.”

On an industry basis, the BankSA survey found confidence in the agriculture sector had plunged by 36.7 points, and is now well below the 100-point benchmark, while transport, finance, construction and manufacturing were the most upbeat industries.

The independent survey is based on a statewide phone survey of 300 consumers and 300 business owners and managers.